UPDATE 3-Canadian oil train derails, burns after brakes activated

By Solarina Ho

TORONTO Jan 8 A Canadian National Railway
train carrying crude oil and propane derailed and
caught fire in New Brunswick on Tuesday night after the
emergency brakes were activated, federal safety officials said
on Wednesday.

The accident, the latest in a string of derailments that
have put the surging crude-by-rail business under scrutiny,
involved 17 cars on the railway's main line, Canadian National
Chief Executive Claude Mongeau told a news conference. A
locomotive also derailed, the railway said.

Five loaded tank cars carrying crude from western Canada to
Irving Oil's Saint John refinery and four carrying propane were
among the derailed cars, CN said.

There were no injuries, but the fire that followed the
derailment burned through the night. CN spokesman Mark Hallman
said the most recent check on Wednesday showed two propane tank
cars and one crude tank car were on fire.

Approximately 150 residents were evacuated, local officials
said.

"At this point, the issue is contained, but of course things
are evolving and we will be addressing the situation with the
greatest possible safety," said Mongeau.

"It's premature to talk about the exact content of each car,
but the origin of the crude is from Western Canada."

CN said it will reroute trains through alternate lines.

"The exact sequence of events has yet to be determined,"
said Transportation Safety Board (TSB) official Dan Holbrook.

While no one was hurt, the accident revived memories of a
devastating derailment last July, when a runaway train carrying
light crude from North Dakota's Bakken region exploded in the
heart of the town of Lac Megantic, Quebec, killing 47.

The CN train was not carrying the ultra-light Bakken oil
from North Dakota that has exploded in other recent
crude-by-rail accidents.

However, other types of very light crude are also produced
in Canada, and several market sources said it was likely that
the train was hauling one of these grades.

"Based on what we typically see processed at Irving's
refinery, a lighter crude is most likely what was contained in
those rail cars, although we cannot know for sure," said David
Bouckhout, senior commodity strategist at TD Securities.

The accident comes amid signs of a tipping point in the
intensifying debate over improving the safety of North American
oil-by-rail shipments, although it is unclear whether some of
the measures under consideration would have prevented Tuesday's
fire.

The top U.S. regulator told Reuters that they should know
within weeks whether shippers of Bakken crude have been
mislabeling more-dangerous light-crude cargoes.

A large rail car manufacturer called for the industry to
quickly press ahead with rules to retrofit older tank cars to
make them safer. It is unclear whether older DOT-111 cars, long
seen as flawed, were involved in New Brunswick.

After the Lac-Megantic disaster, Canada told railways they
will have to start telling municipalities what goods they have
been transporting through their jurisdictions.

In December, the Canadian government said it was also
considering classifying crude oil as a higher-risk, dangerous
product requiring emergency response plans for shipment by rail.

UNDESIRED BRAKE APPLICATION

The derailment was caused by an "undesired brake
application" - a term used to describe the application of
emergency brakes in response to a problem, said John Cottreau,
another spokesman for the TSB.

"As soon as the connection between two cars is separated, is
broken, trains go into emergency braking," he said, adding the
agency didn't yet know why it happened in this case. It was not
clear whether the cars were full at the time of the crash,
Cottreau said.

One car toward the front of the train derailed and was found
to have a broken axle, said the TSB's Holbrook, while the
remaining 16 cars came off the rails toward the rear.

Asked whether the axle failure could have been the cause of
the derailment or whether it happened as a result of the
derailment, Holbrook told Reuters he did not want to speculate.

CN shares finished 1.6 percent lower to close at C$58.63 on
the Toronto Stock Exchange.

While railway stocks will occasionally be hurt by headlines
about accidents, and investors should pay attention to any
financial impact from future regulatory changes, the long-term
outlook for rail shares remains solid, said Citigroup Global
Markets transportation analyst Christian Wetherbee.

New Brunswick issued an air quality advisory east of the
derailment and asked residents to take precautions. Officials
said the impact of the derailment and fire on the environment
appeared to be minimal.

CN said the train originated from Toronto and was headed to
Moncton, New Brunswick, about 300 km (185 miles) east of the
site of the accident. The cars were headed to a number of
destinations in Atlantic Canada.

Dec 8 Time Inc, the publisher of Time,
People and Fortune magazines, has tapped Morgan Stanley
and Bank of America Corp to help field takeover or
partnership interest, the Wall Street Journal reported.

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